Vermont Legislative Update 01-19-2018
An analysis from DRM's Government & Public Affairs Team
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Vermont Unprepared for Next Recession, According to Expert
A national budget expert told the House Appropriations this week that Vermont is one of 15 states that is least prepared fiscally for the next recession.
Dan White of Moody’s Analytics gave a presentation that was largely based on charts from this paper. White’s testimony focused on the ability of states to withstand future recessions based on an analysis of the state budget impacts of the 2007 recession.
The nation is in the third longest period of expansion in U.S. history. White said states responded too slowly to the Great Recession; they continued to lower taxes and were late to understand its magnitude. Many states have yet to fully recover from the last recession.
Medicaid Directors are the first to know about the extent of economic downtowns. State revenues are a lagging indicator of economic growth, but Medicaid claims spike quickly when the economy declines. There was a major spike in Medicaid claims in the first quarter of 2008, but declines in revenues occurred several months later. Medicaid is the canary in the coal mine as a recession indicator.
Compounding the risks to states is the enormous gap between state revenues and Medicaid growth, as well as a much greater volatility in tax revenues. That volatility exists because 1) states are more reliant on services; 2) they are more reliant on progressive income taxes (and upper-income taxpayers have very volatile incomes; and 3) states rely heavily on tax incentives. Vermont’s budget is more volatile than average.
According to White, Vermont is not well prepared for the next recession. It would need 11-19 percent of its budget to get through a recession. The state is more than five percentage points away from the reserves it needs.
Bill Would Ban Mandatory Arbitration, Inconvenient Venue Clauses
Companies would be prohibited from entering into contracts with individuals that contain provisions that are deemed to be “presumptively unconscionable” by a bill, S.105, that is pending in the Senate Judiciary Committee. The committee took additional testimony on the bill this week.
The bill would prohibit contracts with individuals from containing:
- A requirement that resolution of legal claims take place anywhere other than where the individual resides or the contract was consummated;
- A requirement that disputes be settled by arbitration;
- A waiver of the right to seek punitive damages;
- A shortening of the statute of limitations.
The bill includes dramatic enforcement provisions. A contract that includes any of these provisions would be considered an unfair and deceptive act and practice, and a plaintiff would be entitled to recover treble damages and attorneys fees. Perhaps more significantly, such a contract would be presumptively unenforceable.
The committee has tentatively agreed to modify the bill in response to concerns raised by the insurance industry. Surprisingly few other businesses have testified against the bill, although privately many have expressed concerns.
The bill is scheduled for a final hearing next Thursday.
Ashe Pushes For Prescription Drug Importation
Senate President Tim Ashe, D/P-Chittenden, told the Senate Health and Welfare Committee on Thursday that ballooning health care costs were “eating everybody’s lunch at the expense of other important policy areas.” Ashe pointed to data showing that health care costs are growing, while other spending areas are shrinking, with “the rise of pharmaceutical pricing as a key contributor.”
Ashe appeared before the committee to advocate for his bill, S.175. He presented a National Academy for State Health Policy chart of brand name drugs cost per dose that compared U.S. vs. Canadian drug prices to support his proposal of wholesale drug importation from Canada. Pointing to additional proposals in the bill, Ashe urged the committee to act, saying that Vermont has been a leader in prescription drug transparency and needs to forge ahead as a legislative innovator, not concerned by threats of litigation that may result.
In addition to allowing wholesale importation of prescription drugs from Canada into Vermont, Ashe’s bill would create a bulk purchasing program for prescription drugs through the Department of Health and require drug manufacturers to provide notice before introducing new, high-cost drugs to the market. The bill would also require health insurers to provide information about the impact of prescription drug spending on premium rates as part of the Green Mountain Care Board’s rate review process. The board would be directed to publish an annual report demonstrating the overall impact of drug costs on health insurance premiums.
Joint Fiscal Office Analyst Nolan Langweil presented the committee with a Discussion Document which analyzed the Vermont Education Health Initiate plan savings on four prescription drugs if purchased wholesale and imported from Canada. Langweil said that he didn’t include some drugs in his analysis because they cost less in the United States.
The hearing concluded with testimony from all three Vermont Congressional offices in support of the bill. A representative from Sen. Bernie Sanders Office emphasized that 71 percent of Americans support drug importation. Rep. Peter Welch, testifying by phone, assured the committee that if the legislation passed, he would work to obtain the waiver needed for importation. He told the committee that “this legislation makes sense -- price gouging is rampant and getting worse and there is leverage in competition." Welch also added that President Trump told him that he supported importation, although he has yet to see federal action on the issue.
The committee is expected to take additional testimony on the issue in the coming weeks.
Business Community Says Go Slow on Minimum Wage Hike
The Central Vermont and Vermont State Chambers of Commerce outright oppose an increase in the minimum wage to $15 an hour. The Bennington and Lake Champlain Chambers of Commerce support it, although the LCRCC position has a nuance.
“Any increase in the minimum wage has to deal with the ‘benefits cliff,’” said Tom Torti, president of the LCRCC in testimony before the Senate Economic Development, Housing and General Affairs Committee. “If you don’t do that then don’t do anything, because you’re only making the situation worse.” Torti said the increase should be phased in over seven years. The current proposal calls for five.
Central Vermont Chamber President Bill Moore noted that the business community had agreed to stepped increases in the minimum wage in 2014. Vermont’s current rate is $10.50 per hour and will increase with inflation beginning in 2019. The federal minimum is $7.25. Moore called for better education and training to help workers advance.
Business owner Michael Rainville of Maple Landmarks, a manufacturer from Middlebury, described a work environment where employees enjoy good benefits and flexible schedules. He said the company often takes a chance on hiring employees with disabilities or teenagers entering the work force. A higher minimum would put pressure on the bottom line and reduce the flexibility he enjoys to help disadvantaged workers. He said the bill as written would increase overall costs at the company by 17 percent over five years.
The committee will take additional testimony and is likely to advance the bill, S.40, in some form.
Chemical Bill Would Allow Medical Monitoring for Exposure to Toxics
A bill under consideration in the Senate Judiciary Committee would hold any company releasing a toxic substance into the environment strictly, jointly and severally liable for any harm resulting from the release and create a private right of action for a person to recover the costs of medical monitoring. The committee held a hearing on the bill, S.197, on Wednesday.
Under the draft bill any release into the air, land, or water, or anywhere a toxic substance may be located would create the liability, even if the release was permitted by law and whether or not the release was intentional. Several witnesses supported the proposal in committee, including two professors from Vermont Law School.
The bill was introduced by two Senators from Bennington County after discovery of PFOA in groundwater adjacent to the former ChemFab Manufacturing Plan.
State May See $38 Million Bump From Trump Tax Cuts
Economists for the legislature and the governor’s office say the state might see a $29.7 million increase in the General Fund for fiscal year 2019 and an $8.1 million increase over prior forecasts in the current fiscal year as a result of the recently-passed federal tax bill. But they caution there is great uncertainty in analyzing the impact of the federal cuts on the Vermont tax base and on individual taxpayers. The analysis was part of the consensus revenue forecast presented this week in several committees.
The January forecast is a regular report by the two economists, Jeff Carr and Tom Kavett, but the analysis was made much more difficult by the recently-enacted federal tax reform bill, and the predictions were far less certain than they normally are, because interpretations of the law are constantly changing. Kavett told the House Ways and Means Committee on Thursday that the team would do another analysis in March when more details become certain.
The presentation also predicted increases in the Transportation Fund and the Education Fund, which are less affected by federal tax policies, and it predicted a range of changes for individual taxpayers. Kavet said 53 percent of Vermonters might pay less in state income tax and 47 percent might pay more as a result of federal changes. Vermont’s income tax policies are partially tied to federal policies.
Workforce Development Group Presents Findings to House Commerce Committee
The group assigned to study and recommend consolidation of all state and federal programs aimed at workforce development presented its initial findings before the House Commerce and Economic Development Committee this week. The report included a series of short-term recommendations but noted that the task of rebuilding the system will take a minimum of three to five years.
The committee’s findings and its report were jointly presented by Seth Bouden and Frank Cioffi of the Greater Burlington Industrial Corporation and Ellen Kahler of the Vermont Sustainable Jobs Fund. Cioffi chairs the state Workforce Development Board and led the study group. Kahler called it “a once-in-a-lifetime opportunity to redesign the workforce development system.”
“We also need to get the employer community more engaged so they understand that they are a key stakeholder in this process,” Kahler said. “We want them to say ‘if you train them this way we will hire them.”
Senate Health and Welfare Set to Approve Controversial Chemical Bill
The Senate Health and Welfare Committee appeared ready to approve a controversial bill dealing with chemical exposure on Friday, but two of its members sought to better understand the central issue under debate and the vote was postponed until Wednesday.
At issue are provisions in S.103 that reduce the burden of proof and restrictions on authority for the Commissioner of Health to add new substances to the list of Chemicals of High Concern to Children, a program that was established by statute two years ago.
As originally passed, the weight of scientific evidence would have to indicate that children would be harmed if exposed to a chemical in a children’s product and it must be likely that children would be exposed. The bill reduces those standards and also allows the commissioner to list chemicals without the recommendation of a science-based working group, which was a part of an original compromise between proponents of stricter regulation and the affected stakeholders. The controversy sidelined the bill in the closing days of the 2017 session.
Mental Health Report Reviews Services and Needs in Vermont
Department of Mental Health Commissioner Melissa Bailey told the Senate Committee on Health and Welfare Committee on Friday that state law should be changed to allow parents and guardians to consent to inpatient treatment for children under the age of 12. Currently, children as young as five years old are required to sign themselves into treatment.
The recommendation was included in the Act 82 Sections 3 and 4 Mental Health System Report that was reviewed by the committee on Friday. The report was a collaboration between the Commissioner of Mental Health, the Green Mountain Care Board, providers, and people affected by current services.
The report recommended that mental health courts be created as part of a coordinated effort to reduce the number of individuals with mental health challenges entering the criminal justice system. It also recommended further development of peer resource capacity;
The report found that:
- Total available mental health workforce is insufficient. A basic increase in wages for staff of Designated Agencies and Specialized Service Agencies, while desirable, may not equate to increased access to care if the size of the total available workforce does not increase.
- The percentage of all Vermont adults with any mental illness is 20 percent, which is higher than the national average. The percentage of all Vermont youth with serious emotional disturbance is six percent, consistent with the national average, and the percentage of all affected Vermont adults receiving treatment is 58 percent, also higher than national average.
- Most inpatient and residential service providers identify the ongoing scarcity of bed resources in each level of care as a contributing factor to lack of access and long waiting times for services.
- Vermont has defined expectations for mental health service parity, agreement across a diverse constituency of stakeholders in how or what achieves true mental health service parity and whether or not such parity exists for individuals presenting with mental health conditions.
The report addressed the issue of the involuntary use of medication on patients, a topic that will receive additional attention from the committee next month.
DEC Launches Web Site for Permit Tracking
The Department of Environmental Conservation has unveiled a new web site for tracking the status of applications for environmental permits. The portal, dubbed ENB2, is considered the next generation of the Environmental Notice Bulletin and is meant to centralize the process of serving notice of permit activities and inviting public comment.
ENB2 evolved from Act 150 of the 2016 session which sought to consolidate 85 permitting processes into five standard procedures. The permits include state and federal approval for nearly all activities regulated by the DEC. The idea emerged from a LEAN management process conducted at the Agency of Natural Resources during the prior year.
The act also contained a provision that requires interested parties to comment on a proposed permit during the permitting process or lose their right to appeal. For the first time, it also established an administrative record for each permit, which will be incorporated into the appeal process. The portal records when a complete application was received, the beginning and ending dates of the comment period and the proposed decision. Comment periods are either seven, 14 or 30 days. Interested parties can register to be notified of proposed decisions by type of permit and geographic area. They may also request that a public hearing be held.
Secretary of State Proposes Open Government Ombudsman
Vermont Secretary of State Jim Condos told the House Government Operations Committee on Thursday that access to public records should be improved and the records of meetings more accessible. He asked the legislature to approve a position for an open government ombudsman to act as an arbiter of requests to state and local officials.
“Right now if you don’t want to release something, the default is to deny a record and wait until you are challenged in court,” he said. “Unless someone is an attorney or a journalist they are unlikely to pursue their rights in court.”
The draft bill includes language that would clarify when a gathering of public officials in a number that would constitute a quorum is not a meeting and when an agency can charge for the production of records. The committee will take testimony on the draft next Wednesday.